No economic gold at Tokyo’s ‘cursed’ Olympics

TOKYO – Taro Aso, Japan’s gaffe machine of a finance minister, irked the political establishment a year ago this week by calling the 2020 Olympics “cursed.”

It turned out that Aso was more correct than he could have ever known as the Tokyo Games is now set to start without foreign spectators, and for the same reason, no real economic boost.

Even the best-case scenario means the loss of a cool US$23 billion, according to Kansai University’s Katsuhiro Miyamoto. Furthermore, Tokyo is on the hook for untold tens of billions of dollars lavished on infrastructure and other upgrades for an Olympics that has already been delayed by a year amid the battle against the coronavirus.

And a worst-case scenario cannot be ruled out – that the event, set for July, does not take place as fast-vaccinating Europe sees a possible third wave and Covid-19 variants head Japan’s way.

Meanwhile, long-term Japan watchers note that the long-expected convergence of reforms that the Olympics were meant to usher in simply never made it off the starting line.

Aso’s frame of reference in March 2020 was 1940, the year of his birth. It was then that Japan’s Olympic-hosting plans were dashed by World War II. Forty years after the 1940 cancellation, Western countries boycotted the 1980 Summer Games in Moscow in protest against the invasion by the then-Soviet Union into Afghanistan.

“It’s a problem that’s happened every 40 years,” Aso sagely forecast 12 months ago. “It’s the cursed Olympics, and that’s a fact.”

The question now for 2020 is just how cursed we’re talking.

At present, Prime Minister Yoshihide Suga hopes to fill stadiums to some extent with domestic fans. But polls show Japan’s 126 million people are firmly against holding two weeks of sporting events during a pandemic.

Some show upwards of 80% disapproval of Suga’s plan. This is about par for the course for a prime minister who has now long passed his honeymoon and has yet to put any significant wins on the scoreboard.

Globally, Suga’s insistence on giving Tokyo its moment in the global spotlight isn’t playing much better. A poll by the Japan Press Research Institute found more than 70% of respondents in China, France, South Korea, Thailand and the US think Tokyo 2020 – despite the fact that this is 2021, the original brand is being retained – should be canceled or, at the very least, postponed yet again.

Suga’s government must weigh the risks to Japan’s soft power. Posterity might not look kindly at a nation that saw fit to hold a potential super-spreader event in one of the globe’s most densely populated cities at a time when the world is hoping vaccinations might just end the pandemic nightmare.

And, in a place no less that’s barely begun to put vaccines into arms or roll out comprehensive testing protocols.

So far, Japan has managed to fly under the radar screen as many developed nations – particularly the US – struggle to contain the pandemic. Holding the Olympics amid so many imponderables might have Japan facing prickly questions in years to come.

A Yomiuri newspaper editorial this week handily sums up the conventional wisdom in Tokyo.

“A great deal will be lost, but in order to realize a safe event, the decision can be said to have been inevitable,” the paper wrote, referring to the “no foreign spectators” move. “It is important to prevent another surge in infections with the novel coronavirus and increase the certainty that the event will be held.”

But short-term economic considerations are ruling the day in Tokyo, and perhaps in dangerous ways. For the Suga government, in power since September 16, it’s really a continuation of the policy priorities of predecessor Shinzo Abe.

The Olympic savior 

For Abe, staging the Olympics was to be the crowning achievement of Japan’s longest-serving government. It was meant to be a political bookmark, linking 2020 and 1964.

This latter year saw Tokyo stage an epic Olympics that marked its post-war coming out party, one secured by Abe’s beloved grandfather, former Prime Minister Nobusuke Kishi.

Then, Tokyo sought to reverse its Pacific War reputation, wowing the world with its neon-lit skylines, futuristic stadiums, cutting-edge telecommunications and game-changing bullet trains. Abe saw Tokyo 2020 as a way to recreate that magic, reversing Japan’s reputation as a nation in decline.

Yet it became something much bigger than a showcase: the Liberal Democratic Party’s grand plan to change the narrative from 20 years of deflation and political drift as Japan sought to restore its place as Asia’s top financial center.

A key piece of the puzzle is 2020 was to be the year Japan welcomed a record 40 million foreign visitors, announcing Japan’s arrival as a top tourism destination. And indeed, the tourism services aimed at foreign visitors was a key sector incubated under Abe.

But placing the Olympics at the core of Abenomics was always a mistake, one dating back to 2013, when Tokyo defeated frontrunner Istanbul.

Back then Abe, who’d taken power in December 2012, employed a samurai metaphor about how firing three arrows at a target ensured success. Abe’s arrows aimed at slaying deflation, included aggressive monetary easing, fiscal pump-priming and a deregulatory Big Bang.

Quickly, though, this grand reform plan was conflated with a few weeks of sporting events. Multiple laudable plans – to cut red tape, revive innovation, boost productivity, empower women, internationalize corporate boardrooms, speak English more proficiently and welcome foreign talent – were all folded into the Tokyo 2020 festivities.

The Games began to be seen as the “game-changer” and “huge disruption” Japan needed, says Jeff Kingston, head of Asian studies at Temple University’s Tokyo campus. It ended up being a massive distraction and a head fake.

Abe termed the Olympics as central to the “revitalization of Japan.” Tokyo Governor Yuriko Koike said the Games would “usher in a new Tokyo.”

Those upbeat slogans helped mask the absence of clear and potent policies to put deflation in the rearview mirror.

Unanswered questions

How a series of sporting events could help increase productivity, tweak taxes to catalyze waves of new tech unicorns, internationalize corporate governance, modernize a rote education system that hinders creativity or improve spoken English skills was never spelled out.

It was never clear how the five-ringed circus coming to town would generate the renewable-energy boom needed to wean Japan off nuclear reactors. Or how a bunch of medal ceremonies would alter a growth-killing demographic trajectory featuring a fast-aging labor force, a falling birthrate and few clear efforts to import more talent.

It’s never been apparent that the kumbaya dynamic that often accompanies the Olympics alone could thaw relations between Tokyo, Beijing and Seoul – albeit Seoul harbored pipe dreams of levering the Games for Olympic diplomacy with North Korea.

As Abe’s government micromanaged Olympic preparations, it spent little time during its nearly eight-year run building economic muscle. Rather than make space for new generations of tech entrepreneurs to create new growth and jobs, Abenomics protected giant exporters, many of them, not surprisingly, Olympics sponsors.

Had Team Abe moved to cut bureaucracy, loosen labor markets and take policy risks, it could’ve generated growth organically, not via massive stimuli, that increased wages and wealth.

The shortcuts Japan took came back to haunt the economy as Covid-19 hit. As growth plummeted, the ruling LDP scrambled to pump an initial $2.2 trillion into the economy – 40% of gross domestic product (GDP).

If Japan had spent the last eight years doing some heavy lifting on reforms, the economy wouldn’t have been toppled so quickly by the coronavirus. Surely the US-China trade war didn’t help.

Yet as any athlete hoping to compete in Tokyo come July can attest, building endurance required training. Suga is suffering the consequences of Japan’s failure to whip the economy into shape.

It could get worse

And now, Tokyo’s hopes of pulling in millions of overseas fans to justify the $25 billion to $30 billion price tag for the Olympics are colliding with harsh realities.

Tokyo organizers say that of the roughly 7.8 million tickets in circulation, about 20% are held by international spectators. The loss of this influx will devastate hotel room occupancy rates, Airbnb hosts, new transportation lines built just for the games, swanky restaurants that sprung up in the last 18 months and myriad other services.

Japanese media wonder how, oh how, things could have gone so horribly wrong – while suggesting things could be even worse.

An Asahi newspaper editorial this week highlighted a growing push by the medical community to have zero spectators – ie, not even local Japanese – at the Tokyo Games. It also cites “limited resources while health care professionals are busy battling the novel coronavirus pandemic.”

Haruo Ozaki, chairman of the Tokyo Medical Association, argued that “if officials stick with the plan to hold the Olympics, the only way to achieve it under the current circumstances will be with no spectators attending.”

Some Tokyo-area leaders hosting Olympic events aren’t waiting for guidance from the International Olympic Committee.

A case in point is Saitama Governor Motohiro Ono, who says the “prefecture will make its own decision independently” on whether to ban spectators in venues for four events it is hosting, including soccer and basketball, if Covid-19 infection rates are elevated.

“From an economic perspective, that would ruin the significance of hosting the Games itself,” says economist Toshihiro Nagahama of Dai-ichi Life Research Institute.

Amid these disastrous signals, the Tokyo 2020 cheerleaders are putting on a brave face.

“The Tokyo 2020 Games will be completely different from the past, but the essence remains the same,” said Seiko Hashimoto, president of the Tokyo Olympics committee. “Athletes will put everything on the line and inspire people with their outstanding performances.”

But two successive Japanese governments that put everything on the line, economically-speaking, are coming up terribly short.

“Cursed” Olympics? Indeed.